The United States Securities and Exchange Commission (SEC) has submitted a filing, urging the court to grant its motion to appeal a ruling from the Ripple Labs lawsuit that deemed the XRP token to not be a security when sold to retail investors.
The agency argues that “knotty legal problems” surrounding the court’s application of the law, specifically the Howey test, warrant a review.
In a filing dated September 8, the SEC calls for the U.S. District Court for the Southern District of New York to grant its motion for interlocutory appeal and “stay further proceedings until the resolution of that appeal,” citing the “knotty legal problems” raised by the court’s summary judgment order.
Judge Analisa Torres ruled in July that XRP is generally not a security under SEC guidelines, particularly when distributed via programmatic sales, such as being sold to retail investors through exchanges.
In its latest filing, the SEC argues that the rulings on programmatic sales and other distributions present significant “legal questions” justifying approval of the agency’s interlocutory appeal.
The SEC suggests that the legal ambiguity arises from whether certain crypto assets fall under the classification of investment contracts via the Howey test, citing differing opinions within the district and other courts considering similar issues.
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The SEC states that while interlocutory appeal should be the exception, this case is exceptional due to its industry-wide significance and special consequence, inviting interlocutory appeal.
These sentiments contradict previous statements from the SEC and its Chair, Gary Gensler, who has previously opposed the need for new crypto regulation, asserting that the SEC’s existing guidelines adequately cover the crypto market, including the notion that most crypto assets on the market are securities.
In a September 8 tweet, Ripple’s chief legal officer Stuart Alderoty calls the SEC’s filing “hypocritical” in light of Gensler’s prior statements about clear rules.
Coinbase’s chief legal officer, Paul Grewal, also questions how crypto firms can have “fair notice” if unresolved legal questions persist in court.
The SEC originally moved to appeal and stay Judge Torres’s decision in August, arguing substantial differences of opinion.
On September 1, Ripple Labs responded with a memorandum of law opposing the SEC’s appeal, contending that the agency lacks substantial grounds for the requested appeal.
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